The local government annual plan season is beginning, with
councils facing austerity budgets. Some, as in Dunedin or
Queenstown Lakes, have gorged on debt, and must face the slow
process of digesting it. Others will be aware that
communities have had enough of rates increases continually
topping annual inflation.
The Dunedin City Council, easily Otago's largest council, has
feasted on new projects and on high general costs, and its
consolidated debt is peaking beyond the extraordinary figure
of $600 million. Although it includes council company debts,
it is still an astronomical figure. As projects small and
large - like the Toitu Otago Settlers Museum, the Town Hall,
the water and sewerage system upgrade and the stadium - came
up for discussion, the annual interest costs were often the
financial focus. The long-term accumulation of debt and
cumulative interest totals could be sidelined behind an
unrealistic optimism, leaving a legacy of commitments to
years of whopping rates increases. Fortunately, the folly of
this course has been recognised, and vigorous efforts are
being made to turn to a sustainable direction.
The council last year managed to sneak the rate increase
under 5%, with 4% the aim this year and 3% the year after.
While these figures are still higher than most ratepayers
might wish, they represent a firm and balanced approach to
council spending. Although most projects must be rejected or
postponed, the council is mindful of its role in economic and
social activity. An austerity budget is essential but too
savage cuts could push Dunedin towards a downward and
The council today released its pre-draft annual plan, its
proposed budget for the financial year beginning on July 1,
and the signs are promising.
The basic increase, although expected to rise, is under the
4% target (2.8%) and for the first time in many years the
council is due to pay back debt rather than increase
borrowing. While any repayments will be small, at least a
start is being made. Gradually, this can be increased and the
debt burden lessened. These figures are encouragingly much
lower than the 7.6% predicted for the coming financial year
at this time in last year's budget round.
At the same time, operating costs are being steadily trimmed.
This has meant some positions have been lost. After a decade
or more when wage increases moved well ahead of many in the
private sector, the general 1.5% increase is more in line
with businesses. Continual efforts will need to be made to
work smarter and leaner and to be ruthless about what is
essential and what is just nice to have. Councillors will
this week meet in workshops to examine the pre-draft plan
before discussing it in public. They will confirm a draft
annual plan, and public submissions will be sought in March
through to early April. Hearings on these are due in early
May, followed by deliberations. The plan should be ready for
adoption before the new financial year. Every year many good
ideas and worthy proposals are put forward by the public and
interest groups, and there is always considerable
disappointment at what is rejected.
Sadly, if the council is to stay under a 4% rise, submissions
seeking any additional spending must clear extremely high
hurdles. The attitude being promoted, and rightly so, is that
if anything new goes into the annual plan, something has to
be taken out.
An added challenge in the past two years has followed the
realisation the council-owned companies, golden geese in
subsidising rates, were in danger of being poisoned
progressively because of excessive dividend demands. The
practice of businesses having to borrow to pay dividends is
worse than poor.
Further, and not surprisingly, the council will confront the
financial future of Dunedin Venues Management Ltd and the
Forsyth Barr Stadium. To make the stadium a success and to
compete with other centres, the council might have to
seriously consider an events fund. This will again cost
ratepayers, but could benefit the city overall.
Councillors and senior council staff in Dunedin, and
elsewhere, are fulfilling their most important and most
difficult tasks as they decide on saving and spending
priorities. It will require tough-headedness, common sense
and forward thinking.